For months now, Minority Entrepreneur News has been advocating that most of President Trump’s revisions to DEI (Diversity, Equity, and Inclusion) regulations and programs, specifically those for contract participation by Disadvantaged Business Enterprises (DBEs), are illegal. They are either flat out unconstitutional in some way, or did not comply with the Administrative Procedure Act (APA).

Well, something is being done about the Trump Executive Orders pertaining to MinorityBusiness Development. On April 20, 2026, the National Association of MinorityContractors (NAMC) joined with a broad coalition of organizations to legally challenge the president’s most recent executive order, EO 14398 -- Addressing DEIDiscrimination By Federal Contractors. EO 14398 bars prime contractors from conducting any activities to specifically include participation by AfricanAmericans, Hispanic Americans and Asian Americans on federal government contract opportunities. It is important to note that prime contractor activities specifically targeting women-owned businesses are not prohibited by the executive order. In fact, EO 14398 changed the term for the banned activity from “illegal DEI programs,” to “racially discriminatory DEI activities.”

Still, EO 14398, in particular, issued on March 26, 2026, has become extremely controversial throughout the federal contracting community. Prime contractors nationwide find that it is burdensome and confusing. Plaintiffs in the NAMC lawsuit argue that EO 14398 violates the First Amendment's free speech and association protections, is unconstitutionally vague, and exceeds the president's authority under the Federal Property and Administrative ServicesAct. Specifically, the plaintiffs argue that the order impermissibly conflates unlawful discrimination with lawful DEI-related expression and programming. And that, to me, seems to be the most obvious legal flaw of EO 14398: that the order appears to be racially discriminatory on its face, creating the exact problem the president claims that it solves.

The way I see it, EO 14398 makes it possible for every group except racial and ethnic minority groups to receive information, training and special invitations to network events pertaining to federal contract opportunities and awards. Off the top of my head, I can think of many ways how EO 14398 can be used to discriminate based on race and ethnicity. But here’s just one: a prime contractor can communicate about a federal contract with a business group fromHarvard University, but not one from Howard University? Did I get that right?And just one more example, a federal prime contractor can buy dinner tickets from the Builders Association of Greater Chicago (BAGC) but not from BlackContractors United (BCU) or Hispanic American Construction Industry Association(HACIA). Is that correct?

The answer to my latter question is “yes, that is correct.” According to Morgan, Lewis & Bockius LLP, one of the oldest and most prestigious corporate law firms globally, “The order’s specification that racially discriminatory DEI activities include the ‘allocation or deployment of an entity’s resources’ -- though not further defined -- may implicate a contractor’s charitable giving and grant making.”

Regarding my initial question: well, members of the NAMC’s Washington, D.C. area chapter report that they are “anxious” about hosting and cosponsoring future events with other African-American community organizations. Many are subcontractors working on federal contracts. One NAMC member said, due to the executive order and the lack of clarity regarding it, the company may stop advertising jobs in a local newspaper targeted to African-American readers. Their concerns are valid.

EO14398 specifically defines "racially discriminatory DEI activities"as "disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements),program participation, or allocation or deployment of an entity's resources." The EO goes on to define "program participation" as"membership or participation in, or access or admission to: training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities that are sponsored or established by the contractor or subcontractor.”

“Expanding access, removing barriers, strengthening institutions, and ensuring that talent and potential are recognized and can thrive across all communities, businesses, and workplaces is not unlawful,” said Emelyn A. dela Peña, Ed.D., President andCEO of the National Association of Diversity Officers of Higher Education(NADOHE). “The executive order seeks to intimidate and threaten contractors, including the federal government’s longstanding partners at colleges and universities. It aims to deter them from maintaining practices or expressing views that support inclusive activities protected by law and the First Amendment.” NADOHE is part of the coalition challenging EO 14389.

Sarahvon der Lippe, Pro Bono Chief Counsel of the Minority Business Enterprise LegalDefense and Education Fund (MBELDEF), said “At its core, the executive order isa gag rule dressed up as a contract clause. It demands minority-owned businesses trade their First Amendment right to speak about race and discrimination for fair access to federal contracts. The Constitution does not permit that trade.” MBELDEF, along with Democracy Forward, a national legal organization, is representing NAMC in its legal challenge of EO14398.

For more responses to Executive Order14398, visit MinorityEntrepreneur News online at menewsonline.com.

EO14173 Ending Illegal Discrimination and Restoring Merit-Based Opportunity, signed on January 21, 2025, is the president’s initial directive to end DEI programs in federal contracting. It sets broad policy directives to end DEI programs, policies and activities. However, it does require agencies to identify up to nine investigations into DEI violations involving companies or non-profits with assets worth $500 million or more. Agencies were given 120days from the issuance of EO 14173 to complete their investigations. IBM is obviously the first victim of that presidential directive. (See article below for more details.)

EO14398, the most recent of the two, is specific with its directives. It defines “racially discriminatory DEI activities” and mandates that prime contractors use specific language in federal contracts to acknowledge their understanding and acceptance of the policies set forth in theEO, including those for subcontractor compliance, government auditing for compliance, the penalties for noncompliance, and that compliance is material to the government’s payment decisions and enforceable under the False Claims Act (FCA).

MandatoryPrime Contract Clauses:

EO14398 compels federal prime contractors to insert specific clauses into all contracts with the federal government and subsequent subcontracts. These clauses must state that the prime contractor and subcontractors will not conduct outreach or activities targeting racial and ethnic minorities or groups, which according to Morgan Lewis, may include charitable giving to individuals and organizations representing racial and ethnic groups.

These federal contract clauses compel federal prime contractors to also report any violations to the EO by subcontractors and any efforts by subcontractors to sue prime contractors for issues pertaining to EO 14398.

Strict Auditing Rules: The federal contract clauses must also grant the federal government the right to conduct contractor audits to verify compliance with EO 14398.

Noncompliance Penalties: Federal contract clauses must acknowledge penalties for not complying with EO 14398. The order directs federal government agencies to cancel, terminate or suspend covered contracts for failure of contractors to comply with the order, and to debar those contractors from bidding on future federal government work. Federal prime contractors must also acknowledge that compliance with EO 14398 is material to the federal government’s payment decisions. As such, any violations of the order are also subject to financial penalties under the False Claims Act.